Process Costing
EXERCISE 3–1: Process Costing and Job-Order Costing [LO1]
Which method of determining product costs, job-order costing or process costing, would be more appropriate in each of the following situations? * a. An Elmer’s glue factory. * b. A textbook publisher such as McGraw-Hill. * c. An Exxon oil refinery. * d. A facility that makes Minute Maid frozen orange juice. * e. A Scott paper mill. * f. A custom home builder. * g. A shop that customizes vans. * h. A manufacturer of specialty chemicals. * i. An auto repair shop. * j. A Firestone tire manufacturing plant. * k. An advertising agency. * l. A law office.
EXERCISE 3–2: Job-Order Costing Documents [LO2]
Cycle Gear Corporation has incurred the following costs on job number W456, an order for 20 special sprockets to be delivered at the end of next month.
Direct materials: * On April 10, requisition number 15673 was issued for 20 titanium blanks to be used in the special order. The blanks cost $15.00 each. On April 11, requisition number 15678 was issued for 480 hardened nibs also to be used in the special order. The nibs cost $1.25 each.
Direct labor: * On April 12, Jamie Unser worked from 11:00 am until 2:45 pm on Job W456. He is paid $9.60 per hour. On April 18, Melissa Chan worked from 8:15 am until 11:30 am on Job W456. She is paid $12.20 per hour.
Required:
* 1. On what documents would these costs be recorded? * 2. How much cost should have been recorded on each of the documents for Job W456?
EXERCISE 3–3: Compute the Predetermined Overhead Rate [LO3]
Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year it estimated that its total manufacturing overhead would be $134,000 and the total direct labor would be 20,000 hours. Its actual total manufacturing overhead for the year was $123,900 and its actual total direct labor was 21,000 hours.
Required:
Which method of determining product costs, job-order costing or process costing, would be more appropriate in each of the following situations? * a. An Elmer’s glue factory. * b. A textbook publisher such as McGraw-Hill. * c. An Exxon oil refinery. * d. A facility that makes Minute Maid frozen orange juice. * e. A Scott paper mill. * f. A custom home builder. * g. A shop that customizes vans. * h. A manufacturer of specialty chemicals. * i. An auto repair shop. * j. A Firestone tire manufacturing plant. * k. An advertising agency. * l. A law office.
EXERCISE 3–2: Job-Order Costing Documents [LO2]
Cycle Gear Corporation has incurred the following costs on job number W456, an order for 20 special sprockets to be delivered at the end of next month.
Direct materials: * On April 10, requisition number 15673 was issued for 20 titanium blanks to be used in the special order. The blanks cost $15.00 each. On April 11, requisition number 15678 was issued for 480 hardened nibs also to be used in the special order. The nibs cost $1.25 each.
Direct labor: * On April 12, Jamie Unser worked from 11:00 am until 2:45 pm on Job W456. He is paid $9.60 per hour. On April 18, Melissa Chan worked from 8:15 am until 11:30 am on Job W456. She is paid $12.20 per hour.
Required:
* 1. On what documents would these costs be recorded? * 2. How much cost should have been recorded on each of the documents for Job W456?
EXERCISE 3–3: Compute the Predetermined Overhead Rate [LO3]
Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year it estimated that its total manufacturing overhead would be $134,000 and the total direct labor would be 20,000 hours. Its actual total manufacturing overhead for the year was $123,900 and its actual total direct labor was 21,000 hours.
Required: